Gold is heading toward its worst annual loss in more than a decade, leaving investors weighing whether a political shift in the US could restore the metal's haven appeal. After starting 2026 with a momentum-fueled rally to a record above $5,500 an ounce, gold now trades below $4,000, down more than 8% so far this year. The artificial intelligence investment boom, soaring bond yields and expectations of interest rate hikes have pummeled the metal.
Tuesday's US midterm elections could shift the narrative back toward inflation and deficit concerns, a setup that may revive gold's safe-haven status. Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments, pointed to a 2019 gold rally and said, "If 2027 looks anything like 2019, this weakness in gold could actually reverse." Polling shows Democrats favored to win the House, while the Senate outcome is more uncertain. Gridlock could limit spending and ease pressure on Treasury yields, which Miskin called "a really good development for gold."
The case for gold also rests on the nation's growing debt burden. Anthony Saglimbene, chief market strategist at Ameriprise, said the next Congress inherits a difficult fiscal backdrop regardless of its makeup. He expects investors worried about US finances to seek havens outside government bonds, with sharply higher yields on deficit concerns potentially acting as a tailwind for the metal.
For now, higher oil prices have fed inflation fears and expectations of tighter monetary policy, weighing on gold even as geopolitical risks have risen. Still, the retreat is beginning to attract buyers. Doug Daly, a portfolio manager at Core Commodity Management, said he has been getting more inquiries from investors looking to buy at lower prices.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing